Polycab India Ltd

Cable

Polycab India Ltd

Cable

Milars Portfolio

CMP
Rs. 1478.55
Rating:
Buy
April 26, 2021

Stock Info

BSE
542652
NSE
POLYCAB
Bloomberg
POLYCAB:IN
Reuters
POLC.NS
Sector
Cable
Face Value (Rs)
10
Equity Capital (Rs cr)
149
Mkt Cap (Rs cr)
22024.88
52w H/L (Rs)
1514.40 - 623.95
Avg Daily Vol (BSE+NSE)
472,056

Shareholding Pattern

(as on 31-Mar)
%
Promoter
68.42
FIIs
6.38
DIIs
9.91
Public & Others
15.29
Source: Ace equity, StockAxis Research

Price performance

Return (%)
1m
3m
12m
Absolute
6.24
24.94
108.43
Sensex
-1.27
2.06
52.43
Source: Ace equity, StockAxis Research

Indexed Stock Performance

Polycab India Ltd Sensex
Polycab India Ltd
Source: Ace equity, StockAxis Research

Strong Leadership in Wires & Cables business along with transforming itself into strong FMEG business makes Company attractive.

Profile
Polycab India Ltd is a leading player in India’s wires and cables industry with more than 18% and ~12% market share in the organized and total market respectively. The company has retail outlets reach of 1,51,000 and ~4,000 authorized dealers/distributors. Project Bandhan connects 1,70,000 electricians and 51,000 retailers.

Consolidated Financial Statements

Rs in Cr Net Sales EBITDA EBITDAM PAT EPS ROE P/E EV/EBITDA
FY18 6770.31 728.88 10.77% 358.01 25.35 15.25% - 1.08
FY19 7985.55 952.76 11.93% 499.70 35.20 17.55% - -0.05
FY20 8829.96 1135.03 12.85% 759.06 50.63 19.79% 14.55 9.66
FY21E 8557.84 1121.08 13.10% 775.76 51.74 17.26% 28.68 19.44
FY22E 10393.67 1247.24 12.00% 879.70 58.67 16.78% 25.29 17.08
FY23E 11528.73 1389.21 12.05% 989.41 65.99 17.54% 22.49 15.05

Investment Rationale

Strong brand recognition in the electrical industry:
Polycab has evolved itself from a B2B player to a fast-growing B2C brand in the consumer electrical market, thus expanding its customer base and extending its reach in the domestic and international markets. The company aims to increase the B2C mix from ~40% to 50% in the medium term.

Transforming itself into a strong FMEG business:
Polycab’s FMEG revenue has grown at the CAGR of 40% from FY16-20. FMEG business will continue to grow at double digit rate due to launch of the product in the premium segment, stable pricing, continuous brand building exercise and expansion of distribution network.

Government initiatives in Power and infrastructure:
The demand for building wire and power cable is expected to increase by government initiatives such as universal electrification, investment in digital & telecommunication connectivity, capacity additions under national solar mission, Housing for all by 2022 targeting 20mn households and smart cities mission envisaging core infrastructure to 100 cities.

Multiple manufacturing locations and backward integration:
The Company has a strong manufacturing experience of over five decades and has invested significantly to augment and upgrade its manufacturing capability. To maintain a smooth supply chain, Polycab has established multiple manufacturing locations in strategic locations, supported by 30 depots across India. A comprehensive backward integration of operation remains a key priority for the Company and has helped Polycab to build manufacturing facilities for all key raw materials, including aluminium rods, copper rods, and various grades of PVC, rubber, XLPE compounds, GI wire and strip. The Company recently acquired the remaining 50% stake in Ryker from Trafigura making Ryker a wholly owned subsidiary of Polycab. Ryker was started as a 50:50 JV with the Singapore-headquartered commodity trading company Trafigura in FY 16, to set up a copper rod manufacturing facility in Waghodia, Gujarat. However, post Trafigura’s global strategic decision to exit from value-add manufacturing businesses in India, Polycab bought out their stake. The plant started commercial operation in 1QFY20 with an annual capacity of 2,25,000 tonnes. Strategic Backward integration in manufacturing enables company to maintain full control over quality and supply chain, lower operational costs, and deliver products at competitive prices.

Outlook & valuation

Polycab Ltd is expected to maintain healthy performance as wire & cable segment is expected to see improvement as infrastructure investments rise, strong housing demand, diversified product portfolio, wide distribution reach, strong brand presence, increasing share of B2C business by scaling up FMEG business, healthy return ratios & robust balance sheet. At the price of 1484, Polycab Ltd trades at PE multiple of 22.5X on the basis of FY23E earnings.

Financial Statement

Profit & Loss statement

Yr End March (Rs Cr) 2018 2019 2020 2021E 2022E 2023E
Net Sales 6770.31 7985.55 8829.96 8557.84 10393.67 11528.73
Growth % 23.09% 17.95% 10.57% -3.08% 21.45% 10.92%
Expenditure
Material Cost 5006.53 5711.66 6051.17 6204.44 7431.47 8243.04
Employee Cost 259.26 300.25 365.75 308.08 415.75 461.15
Other Expenses 775.64 1020.88 1278.01 924.25 1299.21 1435.33
EBITDA 728.88 952.76 1135.03 1121.08 1247.24 1389.21
Growth % 51.87% 30.72% 19.13% -1.23% 11.25% 11.38%
EBITDA Margin 10.77% 11.93% 12.85% 13.10% 12.00% 12.05%
Depreciation & Amortization 132.95 141.45 160.89 175.31 198.31 218.70
EBIT 595.93 811.32 974.14 945.77 1048.93 1170.51
EBIT Margin % 8.80% 10.16% 11.03% 11.05% 10.09% 10.15%
Other Income 64.44 63.78 92.79 134.91 170.65 195.67
Interest & Finance Charges 93.68 116.71 49.54 43.98 43.98 43.98
Profit Before Tax - Before Exceptional 566.68 758.39 1017.40 1036.70 1175.60 1322.21
Profit Before Tax 566.68 758.39 1017.40 1036.70 1175.60 1322.21
Tax Expense 208.23 255.76 244.37 260.94 295.90 332.80
Effective Tax rate 36.74% 33.72% 24.02% 25.17% 25.17% 25.17%
Exceptional Items - - - - - -
Net Profit 358.46 502.63 773.03 775.76 879.70 989.41
Growth % 53.79% 40.22% 53.80% 0.35% 13.40% 12.47%
Net Profit Margin 5.29% 6.29% 8.75% 9.06% 8.46% 8.58%

Balance Sheet

Yr End March (Rs Cr) 2018 2019 2020 2021E 2022E 2023E
Share Capital 141.21 141.21 148.88 148.88 148.88 148.88
Total Reserves 2206.41 2690.80 3660.68 4320.07 5067.82 5859.35
Shareholders' Funds 2347.62 2846.96 3836.42 4495.81 5243.56 6035.09
Non Current Liabilities
Long Term Burrowing 158.95 88.93 10.66 45.61 45.61 45.61
Deferred Tax Assets / Liabilities 55.34 23.10 16.48 -77.66 -77.66 -77.66
Long Term Provisions 9.51 16.24 25.63 25.63 25.63 25.63
Current Liabilities
Short Term Borrowings 568.75 103.07 111.45 111.45 111.45 111.45
Trade Payables 922.09 1520.18 1353.68 1548.23 1687.46 1951.99
Other Current Liabilities 243.58 807.63 401.01 366.06 366.06 366.06
Short Term Provisions 120.01 188.06 142.94 142.94 142.94 142.94
Total Equity & Liabilities 4448.10 5628.30 5960.58 6705.38 7592.36 8648.42
Assets
Net Block 1197.13 1275.58 1422.01 1496.70 1623.39 1729.69
Non Current Investments 31.55 29.39 25.48 25.48 25.48 25.48
Long Term Loans & Advances 150.72 199.25 218.65 218.65 218.65 218.65
Current Assets
Currents Investments - - 40.00 40.00 40.00 40.00
Inventories 1365.70 1995.79 1924.95 2262.80 2466.29 2852.91
Sundry Debtors 1290.82 1334.32 1433.64 1429.13 1505.74 1711.75
Cash and Bank 10.64 316.65 281.31 618.08 1098.28 1455.40
Short Term Loans and Advances 226.38 170.86 182.98 182.98 182.98 182.98
Total Assets 4448.10 5628.30 5960.58 6705.38 7592.36 8648.42

Cash Flow Statement

Yr End March (Rs Cr) 2018 2019 2020 2021E 2022E 2023E
Profit After Tax 358.46 502.63 773.03 775.76 879.70 989.41
Depreciation 132.95 141.45 160.89 175.31 198.31 218.70
Others 53.62 380.81 -427.12 - - -
Changes in Working Capital -341.84 305.32 -622.11 -138.79 -140.86 -328.10
Cash From Operating Activities 362.44 1229.96 244.64 812.29 937.15 880.01
Purchase of Fixed Assets -198.84 -286.07 -290.13 -250.00 -325.00 -325.00
Free Cash Flows 163.61 943.89 -45.50 562.29 612.15 555.01
Others -4.56 -126.38 26.84 - - -
Cash Flow from Investing Activities -187.83 -407.73 -262.25 -250.00 -325.00 -325.00
Increase / (Decrease) in Loan Funds -78.92 -565.06 -119.41 - - -
Equity Dividend Paid -16.99 -2.88 -179.30 -116.36 -131.96 -197.88
Others -93.91 -83.47 309.43 - - -
Cash from Financing Activities -189.82 -651.40 10.71 -116.36 -131.96 -197.88
Net Cash Inflow / Outflow -15.21 170.83 -6.90 445.92 480.19 357.13
Opening Cash & Cash Equivalents 23.44 8.23 179.06 172.16 618.08 1098.28
Closing Cash & Cash Equivalent 8.23 179.06 172.16 618.08 1098.28 1455.40

Key Ratios

Yr End March 2018 2019 2020 2021E 2022E 2023E
Basic EPS 25.35 35.20 50.63 51.74 58.67 65.99
Diluted EPS 25.35 35.20 50.63 51.74 58.67 65.99
Cash EPS 34.77 45.17 61.36 63.44 71.90 80.58
DPS - 3.00 7.00 7.76 8.80 13.20
Book value (Rs/share) 166.25 200.56 255.88 299.86 349.74 402.53
ROCE (Post Tax) 14.18% 18.97% 23.17% 18.78% 18.16% 17.64%
ROE 15.25% 17.55% 19.79% 17.26% 16.78% 17.54%
Inventory Days 77.78 76.82 81.03 95.00 95.00 95.00
Receivable Days 66.43 59.99 57.21 60.00 58.00 57.00
Payable Days 61.36 55.82 59.40 65.00 65.00 65.00
PE (x) - - 14.55 28.68 25.29 22.49
P/BV (x) - - 2.90 4.95 4.24 3.69
EV/EBITDA (x) 1.08 -0.05 9.66 19.44 17.08 15.05
Dividend Yield 0.94% 0.52% 0.59% 0.89%
P/Sales (x) - - 1.26 2.60 2.14 1.93
Sales/Net FA (x) 5.82 6.46 6.55 5.86 6.66 6.88